Bank of England confirms high-speed traders hacked audio feed

Dec 19, 2019

First Read

Hits & Takes
By JLN Staff

The CFTC Commissioners must have sore jaws today from all the statements they issued yesterday about their decisions from their open meeting. That, or the fingers of their staff are stiff from all the typing. There were a lot of words flowing out of the CFTC yesterday as CFTC Chairman Heath Tarbert has accelerated the pace of decision making at the Commission.~JJL

Atos has acquired Google Cloud Premier Partner Maven Wave, which is a firm that Chuck Mackie works for.~JJL

Effective on Jan 13, 2020, CME and CBOT will permit ICS STIR futures and options transactions to be executed as block trades, provided that each leg of the ICS meets the smaller of the threshold requirements for the underlying products. ~JJL

Bitcoin mining machine manufacturer Bitmain laid off its head of Global Sales, Bill Zhu, this month. The company’s sales team is now being managed by a group of four employees who formerly reported to Zhu.~MR

Byron Baldwin will be leaving Eurex after over fourteen years in Fixed Income ETD and OTC IRS Clearing at the exchange.~JJL

CME bitcoin futures celebrated their second birthday yesterday. The product launched on December 18, 2017.~JJL

The NYSE Stock had Richard Rosenblatt, founder and CEO of Rosenblatt Securities ring the opening bell yesterday in celebration of their 40th year as an NYSE floor broker.~JJL

The World Federation of Exchanges’ December issue of Focus is now out featuring a new video on stock market data designed to educate stakeholders on the importance of valuing stock market data correctly for users who profit from it. They also feature articles on sustainability from the Athens Exchange Group, Boursa Kuwait and the Moscow Exchange.~JJL

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The Fed’s Libor Replacement Would Shackle Small Banks; The new proposed benchmark is a bad fit for most borrowers, and could freeze credit in the event of a crisis.
Scott A. Shay – WSJ
The Federal Reserve’s “solution” for one big problem risks creating another. The task force it convened to study reference rates—the interest-rate benchmarks used to determine rates throughout the economy—aims to impose a new standard to replace the London interbank offered rate, which is due to expire in 2021. Not surprisingly, the big banks represented on the task force would benefit most under the Fed’s proposed Libor replacement, the new secured overnight financing rate. But it isn’t clear why the Fed or any other market player should welcome SOFR.
/on.wsj.com/2S8ySBN

****Shay is chairman and co-founder of Signature Bank of New York and author of “In Good Faith: Questioning Religion and Atheism.”

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Wall Street’s Machine of Silence Stopped a #MeToo Revolution; The finance industry apologizes every now and then, but it hasn’t caught up with the times.
Max Abelson, Katia Porzcanski – Bloomberg
The unusual thing about the sexist comment from money-management billionaire Ken Fisher wasn’t what he said or how many people heard him—it was that he got into trouble for saying it. For at least a decade, the head of Fisher Investments, an empire that oversees more than $115 billion, has been known to make casual references to sex and genitalia in front of his colleagues and peers. People who’ve worked with him say the usual response to his inappropriate language is nervous laughter or awkward silence. He suffered no fallout when he said at a conference last year that his life’s regret was not having more sex, after comparing a mutual fund that brags about performance to a bachelor who walks up to a woman in a bar and asks her to sleep with him.
/bloom.bg/2Q43cdR

***** Machine of Silence is the phrase of the day.~JJL

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Google’s Larry Page gave $400 million in Christmas donations. Not a penny went straight to charity.
Theodore Schleifer – Vox
Every year, around this time of the holiday season, Google co-founder Larry Page makes a huge gift to charity. In 2015, Page’s foundation dug deep and directed $94 million in new Christmastime giving. The next year around the same time, it sent $129 million out the door. By 2017, the group was donating twice as much during the holidays as it was just two years before, giving $180 million from his fortune to philanthropy.On the surface, gifts like these help enshrine Page as one of America’s most generous philanthropists, with a charitable track record befitting the world’s seventh-richest person. There was just one problem, buried deep in tax records: None of this $400 million donated by his philanthropy, the Carl Victor Page Memorial Foundation, was actually going directly to charities.
bit.ly/38QSvUJ

*****How does this happen?~JJL

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How to Drink Your Way Around the New Proposed Wine Tariffs; What you might be facing at the wine shop this coming year, and how to find just-as-delicious bottles that won’t be affected by price changes.
Elin McCoy – Bloomberg
“We’re in shock and panic mode. It’s a nightmare.” That’s what gloomy New York wine importers, retailers, and European producers were saying last week. Stiff tariffs on French, German, and Spanish wines went into effect in October, and on Dec. 12, the Office of the U.S. Trade Representative (USTR) upped the ante, publishing an expanded list of proposed tariffs on all European wines of potentially up to 100%. After France taxed U.S. tech companies, earlier this month the USTR threatened 100% tariffs, specifically on Champagne. (And French cheese.)
/bloom.bg/2MayJdb

****Where do I start?~JJL

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US government lists fictional nation Wakanda as trade partner
BBC
A USDA spokesperson said the Kingdom of Wakanda was added to the list by accident during a staff test.The department’s online tariff tracker hosted a detailed list of goods the two nations apparently traded, including ducks, donkeys and dairy cows. In the Marvel universe, Wakanda is the fictional East African home country of superhero Black Panther.
/bbc.in/35D9MyT

*****Clearly this is for the vibranium market. I suggested futures on these back on April 1, 2019.~JJL

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Wednesday’s Top Three
Our most read story on Wednesday was our John Lothian News Martin Hollander Reflections – remembrances of Mr. Hollander, who was killed, along with his family, in the volcanic eruption on White Island near New Zealand. Second was Reuters’ story about Wall Street holiday parties try dropping booze for bootcamps, smoothies. Third was another John Lothian News piece, the video presentation New Year’s Day Launch Seen as Just the Start of Illinois’ Recreational Canna Business.

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Lead Stories

Bank of England confirms high-speed traders hacked audio feed; Hedge funds reportedly gained information from a Bank of England press conference audio feed five to eight seconds faster than other marker participants.
Hayley McDowell – The Trade
The Bank of England has confirmed an internal audio feed of press conferences was hacked by high-speed traders seeking early access to information before the rest of the market.
bit.ly/2S6enW7

These Are the Trades That Gutted Bonuses This Year
Allison McNeely and Katherine Doherty – Bloomberg
Idiosyncratic issues for large, troubled companies dominated; Warning that B rated loans may be next hot spot for investors
A much-feared economic recession failed to materialize in 2019, but there was no shortage of financial trouble for companies. The amount of corporate debt trading at distressed levels hit a new cycle high in November, according to Bloomberg Intelligence. That $127 billion — the most since August of 2016 — reflects a year of idiosyncratic blowups sparked by issues ranging from the opioid crisis in the U.S. to the growing influence of collateralized loan obligations and climate change.
/bloom.bg/2M7A4kU

Special Report: CFTC moves forward on three rulemakings
FIA
The U.S. Commodity Futures Trading Commission held an open meeting on Dec. 18 to discuss several rulemakings related to the regulation of swaps trading and the oversight of clearinghouses. The CFTC agreed to issue a proposal related to cross-border swaps trading by a vote of 3-2; agreed to issue a proposal to ensure fully anonymous trading on swap execution facilities by a vote of 5-0; and approved a final rule on core principles and general provisions for clearinghouses by a vote of 5-0.
bit.ly/34BXvt3

CFTC seeks to depose programmers contacted by futures trader over spoofing software; The US regulator wants to depose programmers of Greenline Financial Technologies and YJT Solutions contacted by Navinder Sarao.
Maria Nikolova – Finance Feeds
The United States Commodity Futures Trading Commission (CFTC) is seeking to conduct additional discovery in its action against Jitesh Thakkar and Edge Financial Technologies, charged with aiding and abetting a spoofing scheme operated by futures trader Navinder Sarao.
bit.ly/2MaPiFT

‘Flash Boys’ exchange IEX to use AI to improve ‘displayed’ trading
John McCrank – Reuters
Exchange operator IEX Group on Tuesday said it plans to introduce a new way to place stock orders that will reduce the chance of trading when the price is likely to move away, leveling the playing field between fast and slow traders.
bit.ly/38UIDcz

CFTC issues ‘no-action’ letters to swaps market participants on Libor transition; Three divisions of the CFTC have issued ‘no action’ relief for firms active in the swaps market transitioning from Libor to alterative benchmark.
Hayley McDowell – The Trade
Swaps dealers and market participants in the US that are transitioning from Libor to alternative benchmarks have been granted temporary relief by the derivatives watchdog.
bit.ly/2sKjMHK

Markets must speed up efforts to ditch Libor, warns watchdog; Financial Stability Board urges ‘significant and sustained’ work to adapt to new benchmarks
Philip Stafford and Caroline Binham – FT
Banks and large asset managers should expect greater oversight of their efforts to move away from the tainted Libor lending benchmarks, a shift that threatens market stability, one of the most powerful global rulemakers has warned. The Financial Stability Board, a Basel-based collection of regulators and central banks, said on Wednesday that there needed to be “significant and sustained efforts” by the official sector and companies to adapt to new benchmarks.
/on.ft.com/2EAtoaU

Hedge Funds, Unicorns May Open to More Investors in SEC Plan
By Robert Schmidt – Bloomberg
Agency wants to revamp ‘accredited investor’ regulations; More finance professionals would be eligible under proposal
U.S. regulators are poised to add new criteria for who’s considered a sophisticated investor in an effort to allow more people to invest in hedge funds or hot startups that have become known for raising billions of dollars outside of public markets.
/bloom.bg/38WKJZk

SEC Proposes to Update Accredited Investor Definition to Increase Access to Investments
SEC
The Securities and Exchange Commission voted to propose amendments to the definition of accredited investor, one of the principal tests for who is eligible to participate in our private capital markets. The proposal seeks to update and improve the definition to more effectively identify institutional and individual investors that have the knowledge and expertise to participate in our private capital markets.
bit.ly/34DBWYV

Hedge Funds, Unicorns May Open to More Investors in SEC Plan
Robert Schmidt – Bloomberg
U.S. regulators are poised to add new criteria for who’s considered a sophisticated investor in an effort to allow more people to invest in hedge funds or hot startups that have become known for raising billions of dollars outside of public markets.
The changes proposed by the Securities and Exchange Commission Wednesday would revise rules that determine who is an “accredited investor,” which qualifies them to buy into riskier, but potentially more lucrative, deals.
/bloom.bg/2PBWf4I

Under Watchful Eye of Central Bankers, Pioneer in Negative Rates Goes to Zero; Sweden, the first to apply negative rates on deposits, reversed the crisis-era policy, at a time when sub-zero rates are drawing scrutiny worldwide.
Paul Hannon – WSJ
Sweden’s central bank, one of the pioneers in wielding negative interest rates, became the first to end that policy Thursday, a move closely watched by other institutions that have resorted to what was supposed to be a radical and short-lived measure.
/on.wsj.com/2PD0NIg

Partner sues commodities broker for clocking up expenses; OTC Global Holdings allegedly in financial trouble after charges for ski trips and posh parties
Harry Dempsey and Gregory Meyer – FT
A partner at OTC Global Holdings, one of the largest wholesale commodities brokers, has sued its founders, alleging the company was in danger of financial failure while it was charged as much as $300,000 per month on personal expenses such as restaurants, ski trips and sport tickets.
/on.ft.com/2r7hYIr

Silicon Valley Exchange Says Wall Street Needs to Slow Down; The Long-Term Stock Exchange wants to list companies that aim for sustainable growth.
Lananh Nguyen – Bloomberg
Eric Ries has plenty of Wall Street doubters. That only motivates him more. The Silicon Valley author, who’s sold more than a million copies of his book The Lean Startup, is putting his own lessons into practice by entering one of the world’s most competitive and cutthroat markets: U.S. stocks. His Long-Term Stock Exchange got the green light from regulators in May, but many market executives still don’t know what to make of it and can’t figure out how it will fit into an already complex ecosystem.
/bloom.bg/2ExMHl5

Fuzzy Math That Fueled Junk Debt Boom Is Sparking Jitters; Getting creative with earnings adjustments helps sell deals.
David Scigliuzzo – Bloomberg
Imagine walking into a bank to borrow money. The loan officer might ask for your pay stubs and tax returns to prove your income, as well as for information about your debts and monthly expenses to determine whether you’re a worthy borrower. If the numbers don’t add up, you’d be out of luck.
/bloom.bg/34DNQ5l

Rival German Banks Forced to Share Branches in Cost-Cutting Drive
Stephan Kahl – Bloomberg
Competing banks split up days in 17 branches near Frankfurt; Profitability is under pressure from regulation, weak economy
Walk into the newest branch of Frankfurter Volksbank, and the counters are lit in baby blue. But enter the building the next day, and they’ve turned bright red. It’s not a design gimmick — rather, the lender’s biggest rival has moved in.
/bloom.bg/2ExG2rh

Central Banks Want New Powers, But at What Cost? Linking monetary policies with governments’ fiscal policies is likely to have negative consequences.
Alberto Gallo – Bloomberg
Central bankers deserve credit for saving the economy from the financial crisis. They won the battle, but not the war. So now they are asking for new powers to fix the side effects of a decade of ultra-low low and even negative interest rates. The price may be a Faustian bargain with governments.
/bloom.bg/2s60vkf

Wary of CLOs? Global Regulator Makes It Worse; The Financial Stability Board flags leveraged-loan risks while admitting much remains unknown.
Brian Chappatta – Bloomberg
Leveraged loans are risky. So, too, are the lowest-rated parts of collateralized loan obligations, which bundle together the speculative-grade loans. That assessment is hardly controversial: It’s simply what the credit grades indicate.
/bloom.bg/2s60Hjt

Former Palo Alto Networks Employee Charged With Running Insider Trading Ring
James Rundle – WSJ
A case of alleged insider trading in Silicon Valley shows that even cybersecurity firms can fall victim to insiders with knowledge of a company’s systems. The Securities and Exchange Commission on Tuesday announced civil charges against five people who, according to the regulator, reaped more than $7 million in profit trading on confidential earnings information about Palo Alto Networks Inc. Federal prosecutors also charged two of them criminally with securities fraud.
/on.wsj.com/2S4cB89

It’s Amateur Hour at the Bank of England; Mark Carney rarely says much of interest at his press conferences. But an eight-second trading advantage shouldn’t be happening.
Marcus Ashworth – Bloomberg
There are some very red faces at the Bank of England after it emerged that a backup audio feed of some of its monetary policy committee press conferences were used by a third-party service and sold to market participants. This means they would have had access to governor Mark Carney’s comments about eight seconds earlier than other listeners and viewers.
/bloom.bg/34yyO0J

A Funny Thing Happened on the Way to the Stock Market Record; Asset bubbles and the desperate search for profits amid negative rates aren’t laughing matters. Be afraid.
Peter Coy – Bloomberg
Apologies for being churlish in the holiday season, but the let-nothing-ye-dismay attitude of the financial markets has me worried. The exuberance feels irrational. Asset bubbles form, remember, when greed overwhelms fear. It’s a truism that bad loans are made in good times when lenders relax their standards. As the American economist Hyman Minsky once put it, stability breeds instability.
/bloom.bg/2EBeT6J

Exchanges, OTC and Clearing

Deutsche Börse starts a series of seminars on stock exchange knowledge; Evening seminars “Your way to the stock exchange” will take place in Eschborn from January to May 2020
Deutsche Börse
From January 29, 2020, Deutsche Börse will again hold evening seminars for private investors at its corporate headquarters in Eschborn via its Capital Markets Academy.
bit.ly/2tACDWn

Nodal Exchange and IncubEx to Launch First Physically Delivered Low Carbon Fuel Standard (LCFS) Futures
Business Wire
Nodal Exchange and IncubEx announced they will launch the first physically delivered California Low Carbon Fuel Standard (LCFS) futures contract on January 24, 2020, pending regulatory review.
/bwnews.pr/2QexQ4H

HKEX in 2019: Year in Review
HKEX
Hong Kong Exchanges and Clearing Limited (HKEX) has had a very busy year; early in 2019, we launched our new three-year strategic plan, focused on three pillars: China Anchored, Globally Connected and Technology Empowered. Over the year, we have begun to deliver against this plan, with an expanded suite of product offerings across asset classes, key market microstructure enhancements, record volumes for our Stock and Bond Connect platforms, and a number of other initiatives to further diversify, build and grow our business.
bit.ly/36P2I21

Simplifile Adds 51 New Counties in 17 States to E-Recording Network
Intercontinental Exchange, Inc
Intercontinental Exchange, Inc. (NYSE:ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, today announced that with the addition of 51 recording jurisdictions in 17 states, Simplifile’s e-recording network now contains more than 2,000 jurisdictions.
bit.ly/2S6f1mv

Sorry, but cryptocurrency will likely make you uncomfortable in 2020
Mike Orcutt – MIT Technology Review
It might even piss you off. Thanks, Libra.
Two years ago, cryptocurrency was a thrill ride. Then the bubble popped, and it became a passing fad that had had its time. To most people, anyway. True believers kept believing, developers kept toiling, and the technology quietly kept growing. Then, last July, Libra showed up. Well, at least a vision for Libra, the name Facebook has given to its “global” digital currency project.
bit.ly/38U7m0Q

Crypto Startup Accused of Illegal Fundraising Ordered to Refund Investors
Dave Michaels – Wall Street Journal
A technology startup that raised nearly $13 million at the peak of investor demand for unregulated cryptocurrencies agreed to pay a fine and provide more transparency about its finances and business plan. Blockchain of Things Inc. also agreed Wednesday to offer its original investors their money back, a feature of other settlements the Securities and Exchange Commission has reached with crypto startups whose fundraising efforts were deemed illegal.
/on.wsj.com/2PB4e20

Fintech

Bloomberg Tradebook global risk head joins Dash Financial as information chief; Steven Bonanno joins Dash after almost three years leading risk operations for the Bloomberg Tradebook agency brokerage business.
Hayley McDowell – The Trade
US agency brokerage Dash Financial Technologies has hired the global head of risk operations for Bloomberg Tradebook in a senior technology role. Steven Bonanno has been appointed chief information officer at Dash Financial, where he will lead the firm’s IT infrastructure and technology platform operations, reporting to CEO of Dash Financial, Peter Maragos. Bonanno has more than 25 years’ experience working in equities trading technology.
bit.ly/2Z6rWqk

A seasoned founder explains how to get into fintech, and what it takes for Silicon Valley to serve the big players of Wall Street
Shannen Balogh – Business Insider
Truvalue Labs provides banks and asset managers on Wall Street with data and analytics around ESG factors to help them assess investments. Hendrik Bartel, chief executive and co-founder of Truvalue, is seasoned in the Silicon Valley startup world. He worked at three startups before going to business school, where he got the idea for his latest fintech, Truvalue Labs. For seed and Series A fundraises, it’s key for startup founders to win the confidence of investors, Bartel said. Capturing the attention of Wall Street can be hard. But once deals are signed, Bartel said, serving those customers is one of the stickiest business models he’s ever seen.
bit.ly/38Nntgq

Goldman Sachs leads $15M investment in Indian fintech startup ZestMoney
Manish Singh – Tech Crunch
One of America’s largest banks has just poured some money to help millions of Indians without a credit score secure loans and make purchases online for the first time in their lives. Bangalore-based ZestMoney announced today that it has raised $15 million from Goldman Sachs and existing investors Naspers Fintech, Quona Capital, and Omidyar Network. Lizzie Chapman, co-founder and chief executive of ZestMoney, told TechCrunch in an interview that the new investment is part of an extended Series B round, the first tranche of which was announced in April this year.
/tcrn.ch/35NYecd

Cryptocurrencies

Heard of bitcoin’s ‘halving’? It’s set to shake crypto markets in 2020
Tom Wilson – If Reuters
you’re not a bitcoin enthusiast, you probably haven’t heard what’s happening next year: It’s called the “halving”, and it will cut production of the cryptocurrency by 50%.
/reut.rs/2PD79Yk

MakerDAO receives $27.5M from Dragonfly and Paradigm to expand into Asia
Celia Wan – The Block
A pair of venture capital firms have invested $27.5 million in the MakerDAO ecosystem. Dragonfly Capital and Paradigm used the funds to purchase around 5.5% of the total MKR token supply in a bid to help the stablecoin project to capture the Asia market that has long been dominated by Tether’s USDT. MKR tokens are used as part of MakerDAO’s governance system, in which holders are granted voting rights and can participate in the decision-making process.
bit.ly/2Z3ivYu

EY releases improved privacy solution for Ethereum, claiming to help cut transaction costs by over 90%
Yogita Khatri – The Block
“Big Four” accounting firm EY has launched an improved tool that it says will reduce private transaction costs on Ethereum – the public blockchain. The tool implements third-generation zero-knowledge proof (ZKP) technology, a cryptographic method, which allows private transactions on public blockchains. EY said it will help make transactions more scalable by “significantly” reducing costs.
bit.ly/2s1IYtq

Crypto scam offers modern twist on classic pyramid fraud; Bulgarian entrepreneur accused of helping to trick millions of investors
Kerin Hope – FT
It was billed as an exciting new cryptocurrency that would one day become more popular than bitcoin and turn myriad small investors into multimillionaires. But OneCoin, launched by a Bulgarian entrepreneur in 2014, was exposed this year as a traditional pyramid scheme operated by an international gang of scammers.
/on.ft.com/35yyO1X

Fed’s Brainard Raises Red Flags Over Facebook’s Libra Project
Christopher Condon – Bloomberg
Says social network’s reach could make adoption of Libra fast; Digital currencies could pose financial stability risks
Federal Reserve Governor Lael Brainard warned of dangers that a digital currency proposed by social networking giant Facebook Inc. could pose to consumers and financial stability while offering a potentially valuable tool to criminals.
/bloom.bg/2Me9BSW

How To Grow Your Crypto Tax-Free
Shehan Chandrasekera – Forbes
I’ve heard a handful of conversations about how cryptocurrency returns are going to be used to fund early retirements, however, one thing I don’t think many investors realize is that there is a specific IRA – or individual retirement account – that allows Americans to save for retirement by holding crypto assets today. If you are a savvy investor who wants to take control of your funds, diversify your risk, and trade while completely deferring or eliminating income taxes these are the types of retirement solutions important to pay attention to.
bit.ly/35F9K9o

Presenting CoinDesk’s Most Influential 2019
Ben Schiller – Coindesk
One of the great things about reporting on the blockchain/crypto industry is the infinite variety of interesting, smart people doing bold, crazy things. From daring entrepreneurs and builders, to inspired thinkers and communicators, this space has no shortage of colorful characters pushing the envelope.
bit.ly/2tA5V7t

Blockchain of Things Pays SEC $250,000 to Settle Unregistered ICO
David Pan – Coindesk
Internet startup Blockchain of Things Inc. (BCOT) agreed to pay $250,000 to settle with the U.S. Securities and Exchange Commission for launching an initial coin offering without registering with the regulator. The federal securities regulator has long held that ICOs are a form of security and thus must be registered. In an order dated Wednesday, BCOT agreed to refund investors who notify the firm they want their money back. It must make efforts to inform token buyers individually and on its website of the potential claim.
bit.ly/2MaHzaR

SEC Proposal Would Broaden ‘Accredited Investor’ Definition
Nikhilesh De – Coindesk
The U.S. Securities and Exchange Commission (SEC) wants to allow more individuals and entities to invest in regulated financial instruments. According to a press release issued Wednesday, the SEC intends to add a list of new qualifications to become an accredited investor. At present, accredited investors are defined as individuals with more than $1 million in net worth (or who earn more than $200,000 per year), an organization with more than $5 million in assets, banks and institutions which meet certain legal definitions or entities that match certain other restricted terms.
bit.ly/2MbE9Vr

19-Year Old Suspect Charged With $1 Million Crypto Heist via SIM-Swaps
Marie Huillet – Cointelegraph
A 19-year old man has been indicted for identity theft as part of an alleged $1+ million cryptocurrency heist affecting at least 75 victims in the United States. A news release published on Dec. 18 by Manhattan District Attorney Cyrus R. Vance alleged that Yousef Selassie, 19, conducted a complex “SIM-swapping” scheme targeting residents across 20 different states. SIM-swapping — also known as a port-out scam — involves the theft of a victim’s cell phone number in order to hijack their online financial and social media accounts by intercepting the automated messages or phone calls used for two-factor authentication security measures.
bit.ly/2M8JKvG

Iran’s President proposes crypto for Muslim nations as an alternative to the US dollar
Yogita Khatri – The Block
Iran’s President Hassan Rouhani has proposed creating a cryptocurrency for Muslim countries as an alternative to the US dollar Rouhani said the U.S. has used economic sanctions as the “main tools of domineering hegemony and bullying” of other nations Last month, BRICS nations also proposed creating a cryptocurrency for settling payment transactions between the group
bit.ly/35DlHwv

SEC settles charges against ICO issuer, imposes $250k fine
by Mike McSweeney – The Block
The U.S. Securities and Exchange Commission has settled charges against the issuer of an initial coin offering.
bit.ly/2twXNVb

Politics

Trump Impeached on Two Counts by House, Setting Up Senate Trial
Billy House – Bloomberg
Republicans stay united behind president in historic vote; Democrats say Trump’s actions left them no choice but to act
The U.S. House of Representatives impeached President Donald Trump on charges of abuse of power and obstructing Congress, the culmination of an effort by Democrats that further inflamed partisan tensions in Washington and deepened the nation’s ideological divide.
/bloom.bg/2Ew9yxq

Sturgeon Vows Legal Independence Referendum as Scotland Agitates
Rodney Jefferson – Bloomberg
Scottish first minister says mandate for vote is undeniable; Nationalists won 48 of 59 Scottish districts in U.K. election
Scottish First Minister Nicola Sturgeon vowed to hold a legal and internationally recognized referendum on independence as she stepped up calls on the British government to allow her to do so in the wake of Brexit.
/bloom.bg/2Z8O7fw

Trump Impeachment Is a Shot in the Arm for the Constitution; Certain norms and principles are starting to look pretty bedraggled.
Noah Feldman – Bloomberg
The House of Representatives’ historic vote to impeach President Donald Trump comes near the end of the president’s third tumultuous year in office — which is also the third year of the prolonged stress test he’s been giving to the U.S. Constitution. It’s an occasion to check in on the most basic question that can be asked in a democracy: What is the state of our Constitution?
/bloom.bg/2S4hoXb

Regulation

ASIC consults on guidance for the new product design and distribution obligations
ASIC
ASIC today initiated consultation on draft guidance for the new financial product design and distribution obligations. The new obligations come into effect in April 2021.
bit.ly/2PB82k2

Westpac ordered to pay $9.15 million penalty for 22 breaches of the Corporations Act
ASIC
The Federal Court of Australia has today ordered Westpac Banking Corporation to pay a penalty of $9.15 million in respect of 22 contraventions of section 961K of the Corporations Act (the Act), and to pay ASIC’s costs of the proceeding.
bit.ly/2trESem

ASIC cancels the AFS Licence of KP International Group Australia Pty Ltd
ASiC
ASIC has cancelled the Australian financial services (AFS) licence of Sydney-based financial services provider KP International Group Australia Pty Ltd, effective 22 November 2019.
bit.ly/2sJFH1I

ASIC updates internal governance and accountability frameworks
ASIC
ASIC has updated its internal governance framework and implemented a new accountability regime. Strengthening governance and accountability measures are part of ASIC’s strategic change program and follow on from the recommendations of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
bit.ly/2Z1fWGm

MetLife Agrees to $10 Million SEC Fine Over Pension-Related Accounting Violations; Lapses resulted in the insurer’s failure to pay thousands of workers their monthly pension benefits
Kimberly Chin – WSJ
MetLife Inc. MET -0.08% has agreed to pay $10 million to settle Securities and Exchange Commission allegations that it violated internal accounting controls related to reserves associated with its annuities businesses.
/on.wsj.com/35CZ4sb

Financial Watchdog Warns About Dangers of Leveraged Loans; A limited number of big banks have the most exposure to these markets, Financial Stability Board says
Paul J. Davies – WSJ
The boom in the market for leveraged loans, a favorite financing source of private-equity-backed companies, has created vulnerabilities in the global financial system, according to a report from international regulators.
/on.wsj.com/38UurAo

SEC Proposes Giving More Investors Access to Private Markets; Americans who meet certain standards would be able to invest in startups before they become public
Paul Kiernan – WSJ
More Americans would be able to reap the rewards of investing early in the next Uber Technologies Inc. or Facebook Inc. under a proposal advanced Wednesday by the Securities and Exchange Commission. They could also get more chances to lose their shirts.
/on.wsj.com/2s0CcnC

FCA probes eavesdropping at Bank of England press conferences; High-speed traders were able to listen to audio feed before official broadcast
Delphine Strauss, Chris Giles and Caroline Binham – FT
The UK’s financial watchdog is probing the revelation that an audio feed of the Bank of England’s market-sensitive press conferences was supplied to high-speed traders before the events were officially broadcast.
/on.ft.com/2Z6oYCc

Toughest Test for New ECB Official Is Repairing Homeland’s Image
Aaron Eglitis – Bloomberg
The biggest challenge for the newest member of the European Central Bank’s Governing Council isn’t interest rates or the size of asset purchases — it’s restoring trust at home after bruising money-laundering and corruption scandals. Martins Kazaks will take charge of Latvia’s central bank this month after a string of local lenders collapsed following allegations they handled dirty cash and even violated North Korea sanctions.
/bloom.bg/35yx3ln

ESMA announces MiFID scheduled publication dates for 2020
ESMA
The European Securities and Markets Authority (ESMA) has published its 2020 calendar of MiFID II/MiFIR relevant publications for the transparency regime and systematic internalisers’ tests. The calendar, available in this page, will assist market participants planning for the next 12 months.
bit.ly/34Byxde

It Pays to Pay Attention to Your Brokerage Account Statements; This alert is being issued jointly by FINRA, NASAA and SIPC.
FINRA
How Often Should You Review Your Brokerage Account Statements for Accuracy?
When was the last time you read your brokerage account statement? For many of us, the answer may be “a while ago” or maybe even “never.”
bit.ly/2EzeiCv

MetLife to Pay $10 Million for Longstanding Internal Control Failures
SEC
The Securities and Exchange Commission today charged MetLife, Inc. with violating the books and records and internal accounting controls provisions of the federal securities laws relating to two errors in its accounting for reserves associated with its annuities businesses. MetLife has agreed to pay $10 million to settle the charges.
bit.ly/36Rmry6

SEC Charges Broker-Dealers With Illicitly Profiting in Partial Tender Offer
SEC
The Securities and Exchange Commission today announced settled charges against two registered broker-dealers, Bluefin Trading LLC and Critical Trading LLC, for violating the so-called “short tender rule” and enriching themselves at the expense of other participants in a partial tender offer.
bit.ly/2MbNcFM

Issuer Settles Unregistered ICO Charges, Agrees to Return Funds and Register Tokens
SEC
The Securities and Exchange Commission today announced settled charges against blockchain technology company Blockchain of Things Inc. (BCOT) for conducting an unregistered initial coin offering (ICO) of digital tokens.
bit.ly/2S8BLCE

SEC Approves 2020 PCAOB Budget and Accounting Support Fee
SEC
The Securities and Exchange Commission voted today to approve the 2020 budget of the Public Company Accounting Oversight Board (PCAOB) and the related annual accounting support fee.
bit.ly/2PA0gXs

SEC Proposes to Update Accredited Investor Definition to Increase Access to Investments
SEC
The Securities and Exchange Commission voted to propose amendments to the definition of accredited investor, one of the principal tests for who is eligible to participate in our private capital markets. The proposal seeks to update and improve the definition to more effectively identify institutional and individual investors that have the knowledge and expertise to participate in our private capital markets.
bit.ly/34DBWYV

Supporting Statement of Commissioner Brian Quintenz Regarding Proposed Rule: Post-Trade Name Give-Up on Swap Execution Facilities
CFTC
I will vote in favor of today’s proposal to prohibit post-trade name give-up practices for swaps that are anonymously executed on a swap execution facility (“SEF”) and cleared (“Proposal”) in order for the Commission to receive further comment on the Proposal’s potential market structure impact.
bit.ly/38TuFb1

Supporting Statement of Commissioner Brian Quintenz Regarding Final Rule: Derivatives Clearing Organization General Provisions and Core Principles
CFTC
I am pleased to support today’s final rule that amends the Commissions regulations governing derivatives clearing organizations (DCOs).[
bit.ly/2s21tOn

Supporting Statement of Commissioner Brian Quintenz Regarding Proposed Rule: Cross-Border Application of the Registration Thresholds and Certain Requirements Applicable to SDs and MSPs
CFTC
I am very pleased to support today’s proposed rule, which, in my view, delineates important boundaries of the Commission’s regulation of swaps activity conducted abroad, which would codify elements of the Commission’s 2013 interpretive guidance,[1] and make important adjustments with the benefit of six years’ additional experience in swaps market oversight.
bit.ly/2Qepeen

Statement of Dissent by Commissioner Rostin Behnam Regarding Cross-Border Application of the Registration Thresholds and Certain Requirements Applicable to Swap Dealers and Major Swap Participants; Proposed Rule
CFTC
I respectfully dissent from the Commodity Futures Trading Commission’s (the “Commission” or “CFTC”) notice of proposed rulemaking addressing the cross-border application of the registration thresholds and certain requirements applicable to swap dealers (“SDs”) and major swap participants (“MSPs”) (the “Proposal”).
bit.ly/2Ewk4Vq

Statement of Chairman Heath Tarbert in Support of Final Amendments for Derivatives Clearinghouses
CFTC
Clearinghouses—often called central counterparties or CCPs—are what make our futures, options, and much of our swaps markets work. Once a buyer and seller enter into a derivatives trade, the CCP takes on each party’s credit risk for the duration of the contract. Hundreds of thousands of trades occur in the United States because market participants never need to worry about counterparties not making good on their payment obligations. The entire risk of an exchange or even several exchanges is centralized within a given CCP. As a consequence, CCPs are the “risk controllers”[1] that stand at the very epicenter of our markets.
bit.ly/35BKfG4

Statement of Chairman Heath Tarbert in Support of the Cross-Border Swaps Proposal
CFTC
I am pleased to support the Commission’s proposed rule on the cross-border application of registration thresholds and certain requirements for swap dealers and major swap participants. It is critical that the CFTC finalize a sensible cross-border registration rule in 2020, as we approach the 10-year anniversary of the Dodd-Frank Act.
bit.ly/35JEczy

CFTC Approves One Final Rule and Two Proposed Rules at December 18 Open Meeting
CFTC
At an open meeting today, the U.S. Commodity Futures Trading Commission approved one final rule and two proposed rules.
Final Rule: Amendments to Derivatives Clearing Organization General Provisions and Core Principles
bit.ly/2Evvd8W

CFTC Provides Relief to Market Participants Transitioning Away from LIBOR
CFTC
Three divisions of the U.S. Commodity Futures Trading Commission today announced that each has issued a no-action letter that provides relief to swap dealers and other market participants as it relates to the industry-wide initiative to transition from swaps that reference the London Interbank Offered Rate (LIBOR) and other interbank offered rates to swaps that reference alternative benchmarks.
bit.ly/2M94VgW

Effective Date for Amendments to NFA Requirements Related to CTA Performance Reporting and Disclosures
NFA
NFA Compliance Rule 2-34 and the related Interpretive Notice entitled CTA Performance Reporting and Disclosures establish performance reporting and disclosure requirements for commodity trading advisor (CTA) Members. NFA recently amended these requirements. These amendments will become effective on February 1, 2020 and accomplish the following:
bit.ly/34ybrUN

Statement of Commissioner Dawn D. Stump Regarding Proposed Rule: Cross-Border Application of the Registration Thresholds and Certain Requirements Applicable to Swap Dealers and Major Swap Participants
CFTC
As I have previously observed from this dais, when the G-20 leaders met in Pittsburgh in the midst of the financial crisis in 2009, they correctly recognized that the derivatives markets are global and that designing a workable solution, though complicated, demands coordinated policies and cooperation.[1] To do otherwise would ignore the reality that modern markets are not bound by jurisdictional borders. Yet, while each country agreed to this coordinated approach, our pace of implementation differed.
bit.ly/35BTA0G

Statement of Commissioner Dan M. Berkovitz Regarding Final Rule Amending Part 39: Derivatives Clearing Organization General Provisions and Core Principles
CFTC
I support the final rule to amend part 39 of the Commission’s regulations for derivatives clearing organizations (“DCOs”). Part 39 codifies eighteen core principles and related regulations with which a DCO must comply to obtain and maintain its registration status. Part 39 also provides additional standards for systemically important DCOs (“SIDCOs”).
bit.ly/2Ez0nwk

Joint Statement of Chairman Heath Tarbert, Commissioner Rostin Behnam, and Commissioner Dan Berkovitz in Support of Proposed Rule Restricting Post-Trade Name Give-Up
CFTC
It is a hallmark of American exchange-style trading systems that the buyer and seller of a given financial instrument have no reason to know—and do not know—the identity of one another.[1] Trading anonymity can be viewed as a great equalizer, leveling the playing field for counterparties of all sizes and types by allowing traders to enter and exit the market without exposing their trading positions and strategies.[2] As a result, markets with pre- and post-trade anonymity are generally not only fairer, but also feature greater liquidity and greater competition between market participants.[
bit.ly/2MbU7yK

Dissenting Statement of Commissioner Dan M. Berkovitz regarding Cross-Border Application of the Registration Thresholds and Certain Requirements Applicable to Swap Dealers and Major Swap Participants
CFTC
I dissent from today’s cross-border swap regulation proposal (the “Proposal”) because it would significantly weaken the Commission’s existing regulatory framework that protects the United States from risky overseas swaps activity.
bit.ly/38SrkZH

Investing and Trading

Traders Got Advance Feed of Bank of England News Conferences; The central bank shut down an audio feed that had been used to gain a trading advantage, according to people familiar with the matter
Anna Isaac – WSJ
The Bank of England shut down an audio feed after it was used to gain a split-second trading advantage on market-sensitive information delivered at news conferences, according to people familiar with the matter.
/on.wsj.com/2Evkzz9

Here’s why the stock-market’s record climb could worsen a year-end funding crunch
Sunny Oh – MarketWatch
Stock investors have had a stellar year, with major U.S. equity benchmarks poised for their best annual gains in years.
But that may not be good news to repo-market participants that need funds at the end of the year, when financial institutions wind down their lending operations to avoid receiving regulatory surcharges that impose requirements for holding additional capital.
/on.mktw.net/2tziSP3

Billionaire Who Joined Climate Skeptics Touts Sustainability
Saijel Kishan – Bloomberg
Hedge fund CQS pledges to be aware of ESG factors in investing; Its founder won’t comment on report he backed climate skeptics
Billionaire Michael Hintze sat in the front row at an invitation-only lecture of the Global Warming Policy Foundation, the main U.K. think tank that’s pushing back against policies to fight climate change.
/bloom.bg/2PZCd3k

Record U.S. Hop Harvest Signals a Coming World IPA Bounty
Agnieszka de Sousa – Bloomberg
U.S. hops output rose 5% this year, National Hop Report shows; Production has boomed in recent decades amid craft beer craze
IPA lovers can raise a toast to news that there are more U.S. hops to quench the thirst of the booming craft-beer scene.
/bloom.bg/2sLzjaA

Analyst Jobs Vanish as a Perfect Storm Hits Wall Street Research
Justina Lee – Bloomberg
Decline in analyst ranks is accelerating as MiFID take hold; Research budgets seen falling as much as 30% next year
A Citigroup Inc. analyst for almost 18 years, Andrew Howell knows very well what to expect when you’re pitching a service that fewer and fewer customers need or want. So he found another line of work.
/bloom.bg/2EAVlPW

BP Follows Total With Drive to Improve Recycling of Plastics
Olivia Konotey-Ahulu – Bloomberg
12% of PET plastic bottles collected globally become new ones; BP will join with Unilever, Danone and ALPLA on the technology
BP Plc is the latest oil giant to announce it would join forces with companies across the plastic value chain to speed up efforts to improve recycling technology.
/bloom.bg/2s28BKG

What Does a Junk Bond Even Mean Anymore? A relentless rally in 2019 has taken the “high” out of high-yield corporate debt.
By Brian Chappatta – Bloomberg
Some people who trade high-yield corporate debt bristle at the moniker “junk bonds.” It’s definitely a more loaded term than the credit-rating company lingo of “speculative grade” or “non-investment grade,” but it’s a useful shorthand that reminds potential buyers that the securities are not for the faint of heart.
/bloom.bg/2S8AKdv

Institutions

NatWest Markets senior team overhauled as CEO and CFO step down; The changes are the first move by recently appointed CEO of RBS, Alison Rose, to overhaul the investment banking division NatWest Markets.
Hayley McDowell – The Trade
The chief executive and financial officers at NatWest Markets are set to depart the organisation in the first major leadership overhaul by recently-appointed CEO of Royal Bank of Scotland (RBS), Alison Rose.
bit.ly/2tr1c7V

BlackRock in Talks to Cancel Option to Take Over iCapital Network; BlackRock would stay on as the financial-technology firm’s largest minority shareholder
Dawn Lim – WSJ
BlackRock Inc. BLK -0.56% previously locked in the right to take over financial-technology firm iCapital Network Inc. The money-management giant is now in talks to undo that deal.
/on.wsj.com/36WPVLj

Ex-Deutsche Bank Executive Facing Jail in Italy Still Has Clout
Steven Arons and Greg Farrell – Bloomberg
Faissola has been advising Qataris who own big stake in bank; Plans to appeal conviction for helping Monte Paschi hide loss
On his third anniversary as head of Deutsche Bank AG’s asset and wealth management unit, Michele Faissola held a town hall meeting where staff were asked to wear black baseball caps embroidered with the number 3. Even his new boss, then-Chief Executive Officer John Cryan, donned one.
/bloom.bg/2PYF6S1

BGC Partners Updates its Outlook for the Fourth Quarter of 2019
BGC Partners
BGC Partners, Inc. (NASDAQ: BGCP) (“BGC Partners” or “BGC” or the “Company”), a leading global brokerage and nancial technology company, today announced that it has updated its
outlook for the quarter ending December 31, 2019.1
bit.ly/2Evgbjz

Renaissance Employees Could Face Clawbacks Over Hedge Fund’s Tax Maneuver; Firm allowed staffers to invest in its hedge funds through their retirement accounts without paying fees
By Gregory Zuckerman and Richard Rubin – WSJ
Jim Simons’s Renaissance Technologies LLC has produced the greatest investment returns of any hedge fund. Now, it also may be facing an unusually painful tax headache.
/on.wsj.com/2MaLzbb

Regions

Japan acts to avert ETF market liquidity squeeze; Loan facility to give brokers access to portion of central bank’s $256bn holdings for up to a year
Robin Harding – FT
The Bank of Japan has launched an unusual lending facility for exchange traded funds as it tries to mitigate the market impact of its ultra-aggressive monetary policy.
/on.ft.com/2sJC3VA

Sweden ends negative rates regime over side-effects concern; Riksbank increases main rate to highest level in almost 5 years
Richard Milne – FT
Sweden’s central bank ended its five-year experiment with negative rates amid growing concern about the implications for the economy, businesses and investors from sub-zero monetary policy.
/on.ft.com/2S8oH03

U.K.’s Richest Woman Gets $422 Million Pay From Betting Empire
Benjamin Stupples – Bloomberg
Denise Coates has hit the jackpot again. The 52-year-old founder and chief executive officer of Bet365 Group Ltd. pocketed 323 million pounds ($422 million) in salary and dividends, according to a filing from the British online bookmaker.
/bloom.bg/36Rlw0J

Chicago City Council votes on marijuana weed pot sales delay
A.D. Quig – Crain’s Chicago Business
The Chicago City Council has voted down a proposal to delay recreational marijuana sales citywide until July 1. The effort to delay pot sales in the city failed on a 19-29 vote.
Weed sales in Illinois are set to start Jan. 1.
The lack of minority ownership in the state’s marijuana industry has been flashpoint in the legalization debate. One compromise in the 610-page marijuana law has been a particular sore spot: Current medical marijuana license holders—companies largely led by white men—were given automatic recreational licenses for existing medical dispensaries, plus a recreational dispensary.
bit.ly/2M5UYkf

Riksbank Hike Ends Subzero Experiment in Global Test Case
Rafaela Lindeberg – Bloomberg
Negative monetary policy removed by Riksbank despite slowdown; Sweden was among five economies globally pioneering measure
Sweden’s central bank ended half a decade of negative interest rates, bringing relief to its finance industry and providing a test case for counterparts around the world experimenting with subzero borrowing costs.
/bloom.bg/2PZABGO

Exclusive: Ant Financial takes stake in Vietnam’s eMonkey: sources
Fanny Potkin – Reuters
China’s Ant Financial, a fintech affiliate of e-commerce giant Alibaba Group Holding Ltd (BABA.N), has quietly acquired a sizable stake in a Vietnamese e-wallet eMonkey, people familiar with the matter said.
/reut.rs/2Z4SrMv

A Tiny African Kingdom Wants to Export Its Cannabis to the World; Marijuana has been cultivated in Lesotho for centuries. Now it’s a critical piece of the government’s agricultural strategy.
Loni Prinsloo, Janice Kew – Bloomberg
Kekeletso Lekaota spends her work days nurturing rows of cannabis plants for harvest. Pruning a few yellowed leaves from stems with thick, flowering heads, she says the job requires a soft touch and delicate hands.
/bloom.bg/34Bh3Oh

Brexit

Queen’s Speech focuses on Brexit and public services; Boris Johnson’s programme includes 29 pieces of legislation to ‘level up’ opportunity
Laura Hughes – FT
Boris Johnson has outlined his government’s agenda for the next UK parliamentary session, with a packed programme of legislation that prioritises completing Brexit on January 31 and improving public services.
/on.ft.com/2sKh4SA

Bank of England Keeps Powder Dry as Brexit Moves into Next Stage
David Goodman – Bloomberg
Saunders, Haskel Vote for an immediate quarter-point cut; Central bank says it’s too early to judge impact of election
The Bank of England signaled it will focus on the next phase of Brexit negotiations as two policy makers continued to push for an immediate interest-rate cut.
/bloom.bg/38Wy1tB

Renewed Brexit fears push pound towards a two-year low
Reuters via Al Jazeera
The pound was on track for its biggest two-day fall in nearly two years on Wednesday as concerns rose that the United Kingdom could still crash out of the European Union without a trade deal in place at the end of a transition period in December 2020. Prime Minister Boris Johnson’s government on Tuesday ruled out an extension to the December 2020 deadline for negotiations on a trade deal with the EU, creating a new Brexit cliff edge and cutting short sterling’s post-election rally.
bit.ly/2Q0W0zl

Miscellaneous

Hacking Your Way Into Business Class; Learn how to score premium airline seats without actually paying a premium—and the best places to go shark diving.
Mark Ellwood and Nikki Ekstein – Bloomberg
What’s better than turning left when you get on an airplane? Scoring the premium seat without actually paying a premium. This week on Travel Genius, Mark and Nikki break down a handful of new and unsung strategies for booking cheaper business-class fares, including the little-known “Fifth Freedom” trick and a new membership club offering far-discounted upgrades. Neither requires going through shady third-party sites, using tons of points and miles, or leaving your upgrade to fate—and both work like a charm.
/bloom.bg/2M8WguW

Bernie Ebbers, WorldCom Chief Jailed for Fraud, Will Leave Prison Early; His daughter, in a court filing, said he was “experiencing full-blown dementia.”
Emily Flitter – NY Times
Bernard J. Ebbers, who was imprisoned in 2006 after his conviction in one of the biggest American frauds of the 20th century, will soon be free after serving a little over half of a 25-year sentence.
/nyti.ms/2sGBGv6

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